Income tax exemption limit may be hiked to Rs 5 lakhs

In what may be a big relief to the common man, the Income Tax exemption limit maybe hiked from Rs 2 lakhs to Rs 5 lakhs, the CNN IBN has reported.

According to the report, The Finance Ministry has sought a report on the same from the I-T department. The CBTD is likely to submit a proposal by June 20, sources were reported to have told CNN IBN.

"Sources further said that the government is also considering raising the tax exemption limit on home loans and health insurance premium. The health insurance premium is likely to be raised by Rs 5,000, as per sources," the report added.

Currently, individuals having an income in excess of Rs 2 lakhs to Rs 5 lakhs are in the 10 per cent tax bracket and are liable to pay tax, subject to exemptions.

The moving of the tax bracket from Rs 2 lakhs to Rs 5 lakhs would mean that there would be no tax payable on income up to Rs 5 lakhs.

At present individuals with an income of Rs 2-5 lakhs are charged an Income Tax rate of 10%, while those in the Rs 5-10 lakhs bracket are charged at 20% and those above Rs 10% lakhs are charged at 30%, apart from surcharge an education cess.

The Hindustan Times had earlier reported that the government was learnt to be gearing up for an overhaul of India's tax regime by considering a restructuring of tax slabs and increasing the income tax exemption limit from the existing Rs. 200,000 to more than Rs. 300,000. Also read 6 expectations a layman has from Union Budget 2014